Maryland attorney general seeks $20 million in damages from fentanyl manufacturer accused of scheme

Ross D. Franklin / AP

John Kapoor, billionaire founder of Insys Therapeutics, leaves federal court in Boston last year after being arrested on fraud charges stemming from allegations the fim bribed doctors to prescribe a fentanyl spray. Maryland's Attorney General is alleging similar actions.

John Kapoor, billionaire founder of Insys Therapeutics, leaves federal court in Boston last year after being arrested on fraud charges stemming from allegations the fim bribed doctors to prescribe a fentanyl spray. Maryland's Attorney General is alleging similar actions. (Ross D. Franklin / AP)

The Maryland attorney general’s office on Thursday accused the manufacturer of a powerful fentanyl spray of violating consumer protection laws thousands of times by engaging in a “deceptive scheme” to buy the help of doctors and deceive insurance companies to boost sales.

The attorney general’s office is seeking $20 million in various penalties from Arizona-based Insys Therapeutics for allegedly paying doctors thousands of dollars as rewards for writing prescriptions to treat conditions other than the drug’s approved purpose of managing the pain of cancer patients.

The money was supposedly for speaking engagements that the attorney general’s office alleges were often alcohol-fueled social events held at bars, strip clubs and private hotel rooms.

To convince reluctant insurers to cover the costs of the prescriptions, company employees were trained to lie about why the drug was being used, the attorney general’s office alleges in legal papers filed Thursday.

Insys reaped more than $20 million in revenue from 3,000 prescriptions written in Maryland, according to the “statement of charges” filed with the state’s consumer protection agency.

An Insys spokesman said it was company policy not to comment on legal proceedings.

The allegations follow a years-long investigation into Insys by the attorney general’s office. The case will be heard by an administrative judge, and Insys could appeal any ruling to Circuit Court.

Attorney General Brian Frosh said the company’s business practices led people in Maryland to become addicted to opioids after being prescribed the fentanyl spray.

“It’s an immediate release so that the person gets a high or a feeling that certainly alleviates pain — but it is also extremely addictive,” Frosh said.

Insys has been the subject of a long-running federal investigation that has led to criminal charges against several doctors and company executives, including billionaire founder John Kapoor. Kapoor has pleaded not guilty to fraud and racketeering charges in federal court in Massachusetts.

In August, the company agreed to pay at least $150 million to settle some of the allegations leveled by federal investigators.

The company’s current management has been trying to move on from the allegations of wrongdoing, saying in a statement last month that the business was in the midst of an “ongoing transformation.”

In February, the company issued a statement saying it was cooperating with Frosh’s investigation and had turned over more than 3.75 million pages of documents. The company said then that it had a “desire to address any concerns raised by its activities in the State of Maryland.”

But Frosh’s office questions whether Insys has been reformed and says in the legal filing that the company was unwilling to turn over some documents to investigators.

Frosh said the case is aimed at “getting Insys to stop.”

His office is asking the consumer protection agency to order Insys to pay $20 million in damages, penalties and returned profits it earned through the alleged scheme. In addition, Frosh has asked the agency to order the company to halt “unfair or deceptive trade practices” and to set up drug treatment programs for patients who received the fentanyl spray.

The consumer protection case is the latest effort by Maryland authorities to hold drug makers and distributors accountable for what they say are destructive efforts to push opioid medications onto patients, fueling an overdose epidemic that now claims thousands of lives a year in the state. Fentanyl, an opioid many times more powerful than heroin, is responsible for an increasing number of those deaths.

Several Maryland counties have cases against drug companies pending in federal court. Lawyers for Baltimore are due in federal court Thursday to argue that its case should be allowed to move forward. Frosh’s office has other ongoing investigations.

But the attorney general said the allegations against Insys were serious enough to be brought in a case of its own.

“The facts that we lay out in the statement of charges are very damning,” he said.

Frosh’s investigators allege that Insys embarked on the scheme to overcome the strict federal regulations that applied to the fentanyl spray, which it marketed as Subsys. The U.S. Food and Drug Administration approved the spray in 2012 only for seriously ill cancer patients, which limited its profitability.

The attorney general’s office alleges that Insys began marketing the spray to so-called “pill mills” — clinics that prescribe high volumes of opioid pain medications — to make more money.

In the legal filing, investigators quoted a former Insys sales representative who told them: “You think I’d be calling on oncologists. I didn’t have a single oncologist on my list. That was a red flag.”

Doctors who agreed to write many Subsys prescriptions were rewarded with fees investigators say were disguised as payments for speaking engagements. Prescribers in Maryland got between $1,000 and $5,400 for single events, which were often lavish affairs featuring expensive wine and other perks paid for by Insys.

The legal papers identify two Maryland doctors who investigators say had especially troubling relationships with the company. The first, Towson-based Dr. Roger Theodore, allegedly had a sexual relationship with the Insys sales person assigned to him. And company representatives continued working with Dr. Eva Dickinson from the Eastern Shore even though they knew she was using the fentanyl spray herself, according to the attorney general’s office.

Neither doctor is accused of any crimes or violations in the attorney general’s action against Insys.

Peter McDowell, an attorney for Theodore, said the doctor did have a romantic relationship with an Insys employee but that no prescriptions were written based on the relationship. McDowell said Theodore prescribed Subsys to about 40 patients between 2013 and 2016 and that the prescriptions “were medically necessary, reasonable and appropriate.”

Dickinson could not immediately be reached for comment.

Theodore is currently on probation with the Maryland State Board of Physicians after the panel found problems in May with how he treated pain patients, according to state records. Dickinson pleaded guilty last September to a misdemeanor drug charge and received probation after Maryland State Police found a marijuana growing operation at her home, according to state records. The state board stripped her of her license to practice medicine in August 2017.

Despite its recruitment of doctors, Insys initially found that insurance companies refused to cover the cost of the prescriptions. In response, the state alleges, the company created a unit to deceive insurers about why the drug was being prescribed. Insys allegedly directed company employees to pose as staff from doctors’ offices and sometimes invent cancer diagnoses to fool insurers.